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Individual health coverage needs reform, proprietors say

Phil Gross never thought a broken arm could nearly ruin his
business.

Phil Gross never thought a broken arm could nearly ruin his
business.

But that’s the situation Gross found himself in when his
daughter broke her arm. Gross had health care coverage through an individual
insurance plan he purchased for his family, but he soon found it wasn’t as
comprehensive as he thought. He soon faced several thousand dollars in medical
bills from the hospital where his daughter was treated. That put a dent in
Gross’ credit rating.

“When it came to using (the insurance), it didn’t do
anything,” said Gross, a sole proprietor who owns Cars by Design in Manheim, Lancaster County.

Gross’ struggle with insurance is not unique.

As legislators in Harrisburg
debate how to make quality coverage more accessible to small businesses, some
observers fear that the needs of individual policyholders are being ignored.

A report released in June by Families USA, a Washington, D.C.,
nonprofit that advocates for affordable health care, showed Pennsylvania is among many states that don’t
offer many consumer protections to individuals buying coverage. About 1.5
million Pennsylvanians are covered through individual policies, including many
who are sole proprietors. The number of individual policyholders could go up as
more people lose their jobs or employers decide that providing insurance to
employees is too expensive.

“(The lack of protections) is just terrible for the person
looking for insurance,” said Sharon Ward, director of the Pennsylvania Budget
and Policy Center
in Harrisburg.
“You can get insurance, but it won’t cover anything that you need coverage
for.”

The Families USA report exposed many problems in Pennsylvania’s
individual insurance market, Ward said. Among the findings:

  • The state’s Blues plans are required by state law to
    provide coverage to anyone who applies for it. However, other insurers can
    refuse coverage if an applicant is deemed to be too much of a risk.
  • Insurers in Pennsylvania
    are allowed to use medical underwriting, which involves looking at a person’s
    health history when determining rates.
  • Insurers can exclude coverage for pre-existing
    conditions for up to 12 months.
  • The state does not put a limit on what percentage of
    premiums can be used for administrative costs.

The lack of controls in the market makes getting affordable
coverage difficult for many people, especially the sickest people who need
coverage the most, Ward said.

“You’re really at the mercy of the insurance companies,” she
said.

The Pennsylvania Department of Insurance has limited power
to change the situation. The department can deny an insurer’s rate-increase
request if it is not actuarially sound, said Melissa Fox, the department’s
deputy press secretary. But it cannot do much more unless state law is changed.

The Pennsylvania Budget and Policy Center
supports several reforms to the individual insurance market, Ward said. These
would include prohibiting insurers from denying coverage because of
pre-existing conditions and limiting insurers’ administrative spending.

The increasing struggles of businesses trying to afford
health insurance could lead to more people being forced into the individual
market, said William Hughes of Kathie’s Christmas and Collectibles, a store in Lower Allen
Township that Hughes owns
with his wife. Health-insurance costs for the business’ roughly 20 employees
have doubled over the past five years. Hughes said he knows of other business
owners who have eliminated coverage because they no longer could afford it.

Hughes said he supports Gov. Ed Rendell’s efforts to reform
the health-insurance system. The governor is pushing for the passage of the
Pennsylvania Access to Basic Care program, which aims to provide
state-subsidized insurance to nearly 273,000 adults within five years.

“It makes tremendous sense that something needs to be done,”
Hughes said. “It’s going to have to come from the government.”

Gross said he is unconvinced that any reforms will fix the
system entirely. He and his wife are uninsured, while their children have state
coverage.

“I can’t put it into words how it affects people so badly,”
he said. “It’s not a perfect system, and it never will be.”

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